SaaS - History. Philosophy. Drivers of development

Within the SaaS model customers pay not for ownership of the software as such, and for its lease (i.e., its use via the web interface). Thus, unlike the classical scheme of licensing of software, the customer incurs rather small recurring costs, and he does not need to invest essential means for acquisition of software and its support. The scheme of periodical payment assumes that if need for the software temporarily is absent – the customer can suspend his use and freeze payments to the developer.

From the point of view of the developer, the SaaS model allows to fight effectively against not license use of the software (piracy) as the software does not get to final customers. Besides, the concept of SaaS often allows to reduce costs for deployment and implementation of information systems, though does not exclude them completely.

History

Initially all computer industry used a rent business model  — the first computers cost huge money and their computing powers were given to customers. On the other hand, such lease cannot be considered a kind of SaaS as customers got access to computers directly, but not using global networks of communication.

As the SaaS model is focused on provision of services using the Internet, its development is directly connected with development of a global network. The first companies offering the software as service appeared in the western countries in 1997 — 1999^[1], and the acronym of SaaS entered the broad use in 2001^[2].

SaaS philosophy

Theoretically, any paid web service can be adjusted to determination of SaaS, however in practice this term usually is understood as the business software. As a rule, the software is on demand positioned as cheaper and simple alternative to internal information systems in the enterprises of small and medium business. However, use of the SaaS model in large and very large enterprises can also be economically reasonable.

Now practically PUSSYCATS (corporate information systems) can be found in all functional classes systems supporting the SaaS model. For some functional classes of CIS (for example CRM HRM ITSM , etc.) the concept of SaaS approaches especially well, and it is already actively put into practice. Usually rather simple and replicated systems which do not require significant adaptation under each specific customer become the software on demand.

Key characteristics

The software on demand has the following key signs ^[3]:

• Access to the software is far off provided on network channels via the web interface;
• The software is unrolled in uniform data center, but not at capacities of each specific customer;
• The software is provided under lease and assumes periodical payments. The cost of technical support is usually included in rent cost;
• Software updates are installed on a centralized basis on the side of SaaS provider. Thus, customers do not need to set patches and to monitor updates of a system.

Problem number 1

Problem number 1 is password management. In the SaaS model of the application are in a cloud therefore the main risk is use of several accounts for access to applications. The organizations can solve this problem thanks to unification of accounts for the cloud and local systems. When using a system of a uniform input, users get access to workstations and cloud services using one account … This approach reduces the probability of emergence of the "podvisshy" accounts subject to unauthorized use after dismissal of employees.

Cost

The software is on demand provided to the customer in lease and always assumes periodical payment. As unit of tariffing users (are usually used when providing CRM) or number of entries in the database (when providing a HRM system), is more rare – some other functional characteristics (for example, the number of certain transactions or traffic)^[4]. In certain cases the mixed models within which expanded functions can be paid in addition are offered customers (for example, the customer can pay for users and for the expanded data warehouse).

If the software does not require initial adaptation under needs of the customer, initial payment for software can be absent in principle. This circumstance is the most important advantage of the SaaS model over classical licensing of the software which requires significant initial investments on its purchase. Periodical lease payments can be compared to the cost of technical support – usually they strictly register in the agreement and therefore are predictable. Thereby, protection of investments of the customer into the used software product is provided.

Differences from other models

Together with the term SaaS the determinations of Hosted Applications and Application Service Provider (ASP) having close though several other sense^[5] are often applied ^[6]. The key difference of SaaS from ASP consists that within the SaaS model the customer buys access not to the application, and to certain business functions which, strictly speaking, can be implemented somehow. Within the ASP model the selected installation of the software unrolled on the remote website of provider and which does not have multiple owners (multi-tenant architecture) is provided to each customer. One more difference is that not only business applications, but also office or infrastructure by software can be meant by the term ASP.

Nevertheless, the terms ASP and SaaS are very close to each other and in certain cases can be used as synonyms.

Drivers of SaaS

The key factor explaining economic expediency of SaaS is "scale effect" - the SaaS provider services a great number of clients and therefore spends smaller quantity of resources for management of each copy of the software. Eventually, the periodic cost of services for the final customer becomes below the costs arising when using classical model of licensing.

At the moment it is possible to select several main^[7], stimulating use of the software on demand by customers and development of these products by developers.

Drivers of SaaS for customers

• The lack of need to unroll the client software in the organization – access to software is provided via the normal browser;
• Cost reduction due to expense reduction on placement and information systems administration in the organization. These expenses include lease of premises, the organization of data centers, compensation of employees, etc.;
• Cost reduction due to expense reduction on technical support and updates of the unrolled systems;
• Speed of implementation;
• The clear interface – most of employees already got used to use of web services;
• Clarity and predictability of payments, protection of investments.

Drivers of SaaS for developers

• Growth of popularity of web services for end users;
• Development of web technologies, big functionality of web applications and simplicity of their implementation;
• Fast processes of implementation and rather low costs of resources of service of the specific client;
• Easy penetration on global markets;
• Lack of problems with piracy and non-licensed distribution of software;
• Unlike classical model, the customer of SaaS becomes attached to the developer – he cannot refuse technical support and continue to use a system. Thus, protection of investments of the developer into sales process is provided;
• In the long-term period income from SaaS can appear above the profit got from sale of licenses and rendering technical support (even taking into account expenses on a hosting management of applications).

The limiting factors

Along with drivers which induce customers to implement the software on demand, and developers – to invest resources in its creation, there is a number of the restraining factors limiting use of this model.

First, the concept of SaaS is applicable not for all functional classes of systems. As the main economy of resources of provider is reached at the expense of scale, the SaaS model is inefficient for systems requiring deep individual adaptation under each customer and also the innovative and niche solutions.

Secondly, use of the software on demand almost always means the customer's binding to the only developer who places the software on the platform, performs its administration and support. This circumstance can lead customers to a number of the problems connected with possible instability of the developer or to any agreement breaches. On the other hand, the value of this factor is often exaggerated as system implementation by the classical principle does not exclude above-mentioned risks but only transfers them to IT department of the customer. At the same time in case of SaaS responsibility of the developer can be accurately regulated in the relevant agreements and assume specific compensation payments.

The main lack of the SaaS model for the developer – requirements to the level of reputation and the high cost of an input on the market is a consequence of the previous thesis. To provide competitive cost to the client, the developer needs "scale effect", so – already formed pool of other customers. For this reason many suppliers of SaaS are unspecialized players, and their primary activity is sale of the classical systems on the basis of licensing.

Thirdly, many customers are afraid to apply SaaS because of security reasons and possible information leak from the supplier of these services. Problems with security practically exclude use of the concept of SaaS for the crucial systems in which strictly confidential information is processed. On the other hand, responsibility for information leak from the developer is usually regulated in the relevant agreements, and the probability of such leak is at approximately same level, as well as in case of use of internal systems. Often, the security of SaaS is at higher level as these systems are unrolled in the industrial data centers using the best solutions on information security.

Fourthly, the essential limiting factor of SaaS is need of existence of permanent connection to the Internet at rather high speed. With development of network the value of this factor will decrease (in the developed countries it is irrelevant already now), however in Russian regions similar problems still arise, and it is necessary to reckon with them.

Besides, permanent licenses become a company asset. Regular payments for a subscription belong to operating expenses and have negative effect on financial results, so — on attractiveness of the company for the investor.

SaaS and clouds

How do Cloud Computing "oblaka" and SaaS and what difference between them correspond?

Cloud Computing (cloud computing) are a style of development and use of computer calculations, technology of data processing in which the software and dynamically scalable resources are provided to the user via the Internet as service.

Software Services is a component of Cloud Computing, one of three main, along with IaaS (Infrastructure as a Service) and PaaS (Platform as a Service).

Levels of the Cloud Computing models:

• SaaS (Software-as-a-Service, the software as service) — the provider provides to the client the application, ready to use.

• IaaS (Infrastructure-as-a-Service, infrastructure as service) — the provider offers the client computing resources in lease: servers, storage systems, network equipment, operating systems and system software, systems of virtualization, resource management system.

• PaaS (Platform-as-a-Service, platform as service) – the provider offers the client a software platform and tools for design, development, testing and deployment of applications of the user.

According to the given models, one of the most popular scenarios of use of "cloud computing" actually repeats an allegory of a maynfreym: programs are stored in "cloud" and executed on virtual machines, and the computer of the user becomes only an access facility to these resources. Fast and simple deployment, lack of capital costs of the server hardware, the simplified remote access – key advantages of "cloud computing", is also big confidence that the technology will have a considerable impact on IT (information technologies).

According to IDC the volume of the world market of "cloud" services (IaaS, PaaS and Saas) in 2009 was $17.4 billion with a tendency to increase up to $44.2 billion in 2013. In the TOP list – 10 strategic technologies for 2010, the cloud computing technology, according to Gartner, is on the first place.

The volume of the Russian market, for example, of the service SaaS model in 2009 by different estimates was from $1.7 to 5 million. At the same time potential market size is $236 million.

According to business logic of "cloud computing", the enterprises of medium and small business should be the main consumers (further — SMB). It is considered that the effect of transfer of the IT functions to "cloud" will be most effective in this sector. "Cloud computing" brings the idea of outsourcing, so so far and not estimated in the Russian realities, to qualitatively new level.

Only in Moscow the number of the SMB enterprises in 2008 was according to the Department of the Federal State Statistics Service for Moscow within 362 thousand units, of them about 52.1% numbering staff up to 16 people and 7.9% numbering staff from 16 to 100 people. According to J'son & Partners Consulting generally across Russia the sector of SMB contains 1.6 million enterprises, from them in 2009 only about 2 thousand used SaaS applications. When accounting lower limit of the stated above market size, ARPU in a month on one enterprise makes about 2,125 rubles or 6,250 rubles when accounting upper limit. At the same time, the % of the SMB enterprises of the sector using SaaS applications in the activity makes only 0.13% of total number.

So this niche of the market is rather free so far, and therefore attracts different players: system integrators, software developers, equipment manufacturers, etc. And the proximity of information technologies, sisters of telecommunications, pushes telecom operators in embraces of "cloud computing" too.

Advantages and benefits of SaaS

1. Использование the software it is licensed.
2. Не it is necessary to set, update and maintain operability of the equipment and the software. Use of cloud infrastructure does not mean purchase of the license as in a case with "package" software, purchase and the maintenance of servers, besides, you can unsubscribe from service at any time if you understand that it does not suit you. Thus, you pay only for what you use.
3. Небольшие recurring costs, instead of essential one-time.
4. Нет need for placement of servers, administration and protection of data security.
5. Платежи are predicted.
6. Приложения are upgraded from time to time. In "cloud" there is always the latest and freshest version of the program or the document. Be sure that it is necessary to reinstall the platform and to pay for updates to you never.
7. Снижаются costs for process of deployment and implementation
8. Снижаются costs for support systems, settings and dear qualified system administrators.
9. Снижение total costs of IT, expensive software, hardware platform, servers and network equipment. Preserving of current assets.
10. Увеличение speeds of deployment of solutions, ensuring working capacity in short lines.
11. Глобальная availability. Taking into account significant savings of means (the cm point is higher) to SaaS services become available to the most wide range of users. In view of the prevalence the majority of SaaS of applications have a user-friendly intuitive interface. It is enough to tell that each of us daily uses Saas, occasionally even without suspecting about it: All popular e-mail clients, Google applications, including Google Docs, online games and even ATMs - all this striking examples of Software as a service, quickly enough and thoroughly entered our daily activity.
12. Гарантированное quality and high level of reliability.
13. Мобильность service. Yours cloud the portal will be available from everywhere where there is an Internet connection. The majority of the SaaS-applications have mobile version, i.e. you will be able easily to get access to it from the smartphone and the tablet that, of course, is very convenient for those who spend in way much time and is forced to run business being outside office. First of all, it concerns systems for project management. Such platforms as 5pm, Russian-language Teamlab and Zoho Projects provided the users with access to cloud offices from mobile devices for a long time.
14. Устойчивость data to loss or theft. If you store the data in "cloud", the provider automatically executes their backup, and it means that for safety of information in 99.9% of cases it is possible not to worry. According to Freeform Dynamics of 75% of the companies consider use of SaaS safe for critical dannykh*.

Obstacles to implementation of SaaS in the CIS

1. IТ-персонал, advising heads, and getting paid, it is not interested in development of technological SaaS, because of possible pay cut and reduction.
2. Большинство customers did not break a psychological barrier.
3. Опасения information leak and commercial data, at removal data out of limits of the network, on remote service.
4. Деятельность potential customers it is insufficiently transparent, double-entry bookkeeping, the unlicensed software and so forth.
5. Недостаточно data transmission channels qualitatively function. 6. Domestic manufacturers and western do not provide to SaaS representatives guaranteed quality.
6. Отечественный the SaaS market is not developed and has small quantity of interesting options and offers.
7. Провайдеры do not realize the benefit and do not keep development of SaaS.

SaaS in Russia

Unlike Western Europe and the USA the SaaS model was not widely adopted in Russia yet. Today it is possible to select at once several factors which slow down development of this model in the territory of Russia and neighboring countries:

• Low culture of outsourcing: the Russian enterprises reluctantly assign the business functions to the "third" companies. This factor slows down not only development of the SaaS model, but also development of all outsourcing services in general;
• High level of piracy: non-licensed copies of the software actually compete with solutions SaaS, especially in the market of the enterprises of medium and small business. In the western countries these markets are the main consumers of SaaS;
• Limitation of the offer: world leaders of SaaS systems do not hurry to adapt the products for the Russian market. As a rule, process of adaptation is rather difficult as it includes not only localization, but also adjustment of systems to the Russian specifics, requirements of the legislation, etc.;
• General lag of the Russian IT industry: by estimates of different experts, the Russian industry lags behind western for several years. Many domestic enterprises still are on initial stages of informatization and do not even think of implementation of solutions SaaS;
• Broadband Internet access is a necessary condition for use of SaaS. As a result, the high cost of such access is still the serious limiting factor of use of SaaS in regions.

Nevertheless, at the moment in Russia there are about 10 different developers proposing own solutions based on the concept of SaaS^[8]:

The complete solutions SaaS directory and projects is available on TAdviser.

Some hosts of SaaS of the platform and solution

• Adaptive Planning, [1]
• Adempiere, [2]
• Compiere, [3]
• DigitCITY, [4]
• Google Apps, [5]
• InSales, [6]
• Microsoft Dynamics CRM, [7]
• NetSuite CRM, [8]
• OpenERP (TinyERP), [9]
• Oracle CRM On Demand, [10]
• SugarCRM, [11]
• TeamWox, [12]
• Megaplan, [13]
• Microsoft Office 365, [14]
• QuickDoc Designer of documents, [15]

Notes

Links

• «Article:SaaS - History. Philosophy. Drivers of development» в разделе Википедии на русском языке
• Microsoft Office 365 in Russia - the blog of the authorized Microsoft partner, [16]